The following is a guest editorial from Larry Rezentes:
In the headline of its September 8 “Viewpoints” editorial, the Great Falls Tribune exhorts that “Its time for more clarity on Great Falls’ utility venture.” It goes on to say “At a Great Falls election forum last week, several candidates referred to the city’s supposed (emphasis mine) loss of “millions of dollars…” No, the Tribune may need clarity, but those who have been paying attention have had the results of the venture revealed to them with great clarity; but not by the Tribune. The editorial ignores the fact that losses reported in the Electric City Power financial statements prepared by the city itself do in fact show operating losses from inception through the end of calendar year 2008, of in excess of $1.8 Million. These losses, coupled with even a minor portion of the proposed write-down referenced in the third paragraph of the editorial, do in fact total millions of dollars. The Tribune’s editorial is in the interest of those incumbent candidates who have supported the city’s “utility venture”. The editorial serves that interest by suggesting that there are doubts as to the relative magnitude of the financial losses produced by operation of Electric City Power and by disparaging those candidates that had suggested otherwise.
The Tribune editorial also completely ignores the fact that Electric City Power has operated, and continues to operate illegally, in violation of its founding ordinance that requires it at all times to be self-sustaining. Instead it continues to operate at a monthly cash deficit from its operations, draining cash from the city through the funding of these losses by “loans” from other city funds. Also ignored is the issue of the $60,000 cost to the city, to be paid to Burns and McDonnell, the consulting firm engaged by the city to arrive at a determination of what to do, while ignoring the issue of accountability for what has been done.
The editorial continues with the assessment that “… the city needs to do a better job of making the case for being a power provider”. No, the city has done a very good job of misrepresenting the basis for such a case; with misleading statements; with withheld and unpublicized financial statements showing the continuing and cumulative history of losses produced; with unwillingness to produce a from-inception history of such losses until being repeatedly prodded into doing so.
No, the time is long past where the city should have convinced the citizens of the desirability of pursuing this venture, if there was any merit whatsoever in the city’s continuation of this misguided pursuit. And to do so without wasting further taxpayer money to have consultants from Burns and McDonnell make a decision for them and cover the tracks of an ill-conceived, illegal, and money-losing, business pursuit, that serves a handful of customers and with no benefit to the citizens of Great Falls.
The Tribune also emphasizes that city management, elected city officials, and, supposedly, we the citizens, are waiting with bated breath for the recommendation of the consultants from Burns and McDonnell as to what to do. I for one am not. The Burns and McDonnell consultants have been selected to unknowingly participate in a whitewash. The consultants indicated in their August 11 meeting with the public that their report will conclude nothing about the reasonableness of the city’s entry into this business in the first place, nor of the effectiveness of the city’s historical and ongoing management of the venture. Their charter, instead, is to recommend what to do, not to make a determination of the wisdom, competence, or legality of the actions already taken. They have in fact unwittingly allowed themselves to be used as a pawn in this whitewash of city elected officials and city management by not insisting that they be allowed to fully explore all the issues of interest to the citizens of Great Falls for inclusion in their report and by not insisting that they be given access to thousands of pages of “secret box” information being withheld. Further, the consultants are reporting to those elected officials of the city, the majority of whom have every reason to self-justify and provide a basis to support a decision to continue the venture, and their ongoing support.
Note also that their assessment of financial results being produced by the venture will be largely based on financial statements and forecasts that ignore the cash flow implications currently, and in the future, of continuation of Electric City Power. As I have pointed out in written materials provided to the consultants, the profit and loss statements and fiscal 2010 forecasts charge the cost of power at the “transitional rate”, whereas the city is still paying out-of-pocket the much higher “pass through rate”, with the difference being credited to a deposit account shown as an asset on Electric City Power’s balance sheet. This is why the city has resisted and has only now begun to prepare cash flow statements for Electric City Power on a monthly basis, showing the ongoing cash drain on the city; though it has not yet, to my knowledge, produced a cash forecast of this cash drain for the results to Electric City Power’s operations projected to occur in fiscal year 2010.
Finally, the Tribune, in the closing statements in its opinion piece, states “as with any investment, the city needs to continue to evaluate the risks and rewards of its ECP investment as circumstances continue to change.” That’s nice. Thanks for the advice. Quite similar to the Tribune’s downplay of the anticipated write-down of the City’s investment in the Highwood Generating Station program in its article on the subject, “City Plans to Writeoff some of its $2.3 Million in Losses”, where it said “Not everyone makes money on investments, as the City of Great Falls is discovering. Yes indeed, as the city has been experiencing month by month since the beginning of Electric City Power, but only belatedly, and under duress, reported these facts to the citizens of Great Falls, and to the Board of Directors of Electric City Power. It is unfortunate that the city did not take that advice several years ago before it squandered, yes, multiple millions of the taxpayer’s dollars.
Lawrence C. Rezentes, CPA